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    Over 160 BSE500 stocks show Golden Cross on charts; can be good buy ideas

    Synopsis

    The Nifty50 index has been holding above its 50-EMA in the last 47 sessions and thrice it made a low near that average and then bounced back.

    ET Online
    NEW DELHI: Making money in the Indian stock market has not been easy amid depressing global cues, but individual stocks have made money for investors so far in 2016.

    The S&P BSE Sensex has moved in a range so far in 2016 and is awaiting fresh triggers for a breakout, which could well take Nifty50 above 8,000 and the BSE Sensex above 26,000.

    Those picking stocks based on technical analysis always follow certain price patterns, indicators and oscillators. One such indicator is the Golden Cross, which signifies strength. Last seen, as many as 165 stocks seem to have completed their Golden Cross formation in the S&P BSE 500 index.

    Also read: Look what MFs are buying! Ten stocks fund managers bought & sold in April

    A Golden Cross is formed when short-term moving averages, such as 50-DMA, break out of the long-term moving average such as 200-day moving average. A Golden Cross indicates traders showing favour for a stock, which is a bullish sign.

    Stocks which have completed the Golden Cross include names like 8K Miles, Aarti Drugs, Adani Power, Alok Industries, Bharat Electronics, Bhushan Steel, BEML, Canara Bank and Coal India, among others.

    “Traders look at the trend to plan the trade setup. Moving averages work in different ways. Usually, when the 50-DMA crosses the 200-DMA, it is called Golden Cross and if the 200-DMA falls below the 50-DMA, it is called a Death cross,” Chandan Taparia, Derivatives Analyst - Equity Research, Anand Rathi Financial Services, told ETMarkets.com.

    “Moving averages also act as support and resistance. Understanding and using all these moving averages depend on the user and his comfort in applying the same,” he added.

    But most commonly used moving averages are 50 DMA, 100 DMA and 200 DMA, which provide clarity of the trend to get a trade setup for optimising return out of the in-depth study.

    The Nifty50 index has been holding above its 50-EMA in the last 47 sessions and thrice it made a low near that average and then bounced back.

    Image article boday


    The long-term average, which is the 200-day moving average, is very important when traders place bets. Usually, stocks that trade below their 200-DMA are considered weak and should not be considered as long-term bets.

    As per theory, if a stock trades above its 200-DMA, it is considered a bullish trend or vice versa. There is no hard and fast rule for any study. Everything works differently in different scenarios and under different circumstances.

    “If the majority of scrips are trading below the 200-day moving averages, then it suggests inherent weakness in the larger market and without whose participation it will be difficult to have long and sustainable rallies,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told ETMarkets.com.

    “It also means that it is a stock pickers’ market in which traders need to concentrate on stock-specific ideas. At no point, the scrips below the 200-day moving average should be considered as value buying opportunities,” he said.

    As many as 298 stocks, or 60 per cent of stocks in the BSE500 index, are trading below their 200-DMA, which includes names like 3M India, ACC, Adani Ports, Alok Industries, Andhra Bank, Apollo Tyres, Ambuja Cements, Bajaj Auto and BHEL, among others.

    In simple words, stocks that are below their 200-DMA for a long time shows that they have failed to attract attention of main market participants.

    The best way is to use a combination of moving averages and create positions as and when short-term moving averages make a bullish crossover above their longer-term moving average, said experts.

    For instance, a crossover of 13 above 34 may suggest that a short-term uptrend has kicked in. Similarly, traders can look for 50-DMA crossing over 100 DMA or 200 DMA.

    Mohammad said such combinations should be chosen after back-testing to create a trading setup rather than depending on a single 200 DMA.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

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    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

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